Behind AAC's performance "changing face": it is difficult to break through

The semi-annual report of the listed companies in the industrial chain entered the intensive disclosure period. After being appreciative of the industry's optimistic performance, AAC Technologies announced its semi-annual report performance, and its performance declined greatly, which is tantamount to “violent thunder”.

On August 23, AAC announced its 2019 interim results. In the first half of the year, AAC's overall revenue was 7.57 billion yuan, down 10% year-on-year; profit attributable to shareholders was about 770 million yuan, down 56.71% year-on-year. For the reasons for both the decline in revenue and net profit, AAC's explanation is: the decline in gross profit and the increase in research and development expenses.

After the disclosure of the 2019 interim results report, AAC Technologies also urgently announced an appointment. AAC Technologies announced that since August 24, 2019, Pan Kaitai will be appointed as the company's chief innovation officer. Once as a strong profitability in the Apple supply chain and a 90% market share in the acoustic field, AAC Technologies is now lacking in innovation and gross profit, which is no longer the same.

After being robbed by Lixun, the traditional business continued to slump

AAC Technologies, Apple's largest supplier of acoustic devices, broke the HK$180/share at the end of 2017 as Apple's waters rose. However, since the beginning of November 2017, its share price has fallen all the way to the present. HK$36/share, this level is at the lowest level after being short-selled in the first half of 2017.

As the iPhone's new orders continue to decrease, its main acoustic business continues to decline. Data show that in 2018, acoustic business revenue and gross profit margin decreased by 9.4% and 3.6 percentage points year-on-year to 8.67 billion yuan and 37.2% respectively; in the first quarter of 2019, revenue and gross profit margin decreased by 22.3% and 5.2 percentage points year-on-year to 18.8. 100 million yuan and 32.9%; in the first half of 2019, acoustic business revenue and gross profit margin decreased by 15% and 7.4 percentage points year-on-year to 3.65 billion yuan and 30.1%.

On the other hand, its competitor Licensing's precision gross profit is stable and its performance is gradually rising. In the first half of this year, Lixun Precision realized operating income of 21.441 billion yuan, an increase of 78.29% over the same period of the previous year; total profit reached 1.816 billion yuan, an increase of 104.21% over the same period of the previous year.

In contrast, the performance decline of AAC's acoustics business far exceeded the industry average.

In addition, the industry has also rumored that AAC is being robbed by Lixun, including motors and acoustics, and among acoustic suppliers, Apple is more willing to divert orders from AAC Technologies to other suppliers. Reducing reliance on AAC's technology, it seems that it is not unfounded.

AAC Technologies said that the acoustic performance in the first half of this year was not good. Due to the decrease in global smartphone and customer shipments, the innovation of specifications and the lengthening of the upgrade cycle, product orders decreased and product price pressure increased.

It should be pointed out that in the face of the current poor environment and the changes in the global smartphone market, AAC customers are affected not only by the acoustic business, but also by the electromagnetic transmission and precision structural parts business.

According to the semi-annual report, in terms of gross profit margin, due to the overall weak market and some new design plans, the early market share increased and the mass production has not reached a certain scale. In the first half of 2019, AAC's gross profit margin decreased compared with the same period of last year. 9.2 percentage points to 27.5%.

Among them, the revenue of electromagnetic transmission and precision structural parts business in the first half of the year fell 12% year-on-year to 3.03 billion yuan, of which the income of precision structural parts increased sharply, while the business of electromagnetic transmission products fell.

AAC Technologies said that the decline in gross profit margin was mainly due to the decline in unit price and shipment volume of electromagnetic transmission products. In addition, in the precision structural parts business, although AAC has successfully penetrated into more high-end Android models, Due to the low level of gross profit margin in the industry, the overall gross profit margin of this business segment was under pressure, down 9.9 percentage points from the same period last year to 29.7%.

The industry believes that the continued decline in gross profit margin has become a pain point that AAC is currently unable to solve. The traditional industry cycle effect is still continuing, which further makes AAC's gross profit margin not only unable to recover, but continues to decline, dragging down the company's overall performance. Vibration. Under this circumstance, seeking performance breakthroughs from the optical new business field has become the key to the moment.

The new spoiler, the optical business "difficult to support"

According to the semi-annual report of AAC, due to the increase in capacity utilization and market penetration, optical business revenue in the first half of 2019 increased by 73% year-on-year to 417 million yuan. The group has successfully penetrated the plastic lens supply chain and became one of the top three suppliers in the world.

In addition, in the second quarter, AAC's optical business monthly average shipments were close to 30 million, which was double the same period last year. With capacity utilization and market penetration gradually increasing, the company plans to double the average monthly shipments at the end of the year to 60 million, and the profitability will continue to increase.

It can be seen that AAC's optical business is already the main force for its performance growth, and shipments are rising.

However, reviewing the performance of AAC's optical business in 2018, its optical business revenue increased to 550 million yuan, accounting for 3% of total revenue, up 240% year-on-year. By the end of 2018, the monthly production capacity of plastic lenses has reached 40 KK. After the yield and efficiency increase, the monthly production capacity exceeds 50 KK, and the current monthly shipment exceeds 20 KK.

As a new spoiler in the optical business field, AAC's optical lens has gradually gained a place in this market with its cost-effective advantages.

In a semi-annual report, AAC Technologies said that the Group will have an optical business with greater potential and scale this year, which is identified as one of the strategic layout direction and the core business growth point. In the first half of the year, in addition to further increasing production capacity and developing plastic lenses and glass-plastic hybrid modules with higher specifications, the Group has planned to build an intelligent manufacturing industrial park in China to accelerate the technological development and large-scale production of wafer-level glass (WLG) lenses. Production. At the same time, the Group is actively developing high-end periscope lens module solutions, launching a camera module project, and building and manufacturing an innovative lens module factory in Nanning, China.

However, in the optical lens market, AAC's competitors are also many, including the lens king Da Liguang, Sunny Optical; in addition, there are wonders, Ou Feiguang, Lansi Technology, Kang Dazhi, Kang Control, etc., many of which are also expanding Wafer-level optical lens (WLO) capacity. In the future, the competition in the optical market will be more intense. AAC Technologies wants to rely on the optical business to end up being "unique."

The industry believes that AAC's current cost-effectiveness to grab orders is not a long-term solution. In the case of the continuous decline in the gross profit margin of mobile terminals, the gross margin of the low-end products will continue to increase. For AAC, it is difficult to fill the gap in the high-end market in a short period of time.